The US Army Lost Track of $6.5 Trillion

August 28, 2016Matthew Gault / War Is Boring.com

The Army made headlines in mid-August 2016 when a Defense Department Inspector General report landed with a heavy thud. The 75-page report detailed all the ways the Army screwed up its accounting of the Army General Fund in 2015. According to the report, Army bookkeepers screwed up the budget to the tune of . . . $6.5 trillion dollars. That's $6.5 trillion in accounting mistakes for the year 2015 alone.

The US Army Lost Track of $6.5 TrillionCooked books and old problemsMatthew Gault / War Is Boring.com

(August 25, 2016) -- By congressional mandate, the Pentagon needs to be ready for an audit of its finances by Sept. 30, 2017. If what's going on at the US Army is any indication -- and it is -- then next fall's audit will be a shit-show of broken promises, cooked books and bizarre accounting.

The Army made headlines in mid-August 2016 when a Defense Department Inspector General report landed with a heavy thud. The 75-page report detailed all the ways the Army screwed up its accounting of the Army General Fund in 2015.

According to the report, Army bookkeepers screwed up the budget to the tune of . . . $6.5 trillion dollars.

Yes, trillion.

That's $6.5 trillion in accounting mistakes for the year 2015 alone. That's such a huge number that it doesn't even make a lot of sense. The annual budget for the entire US military in the past few years has been around half-a-trillion bucks.

How could the Army misplace, fudge, misappropriate or otherwise lose $6.5 trillion? It's simple. Years of no oversight, bad accounting practices and crappy computer systems created this problem. And remember, this is just the Army and just its general fund.

This $6.5-trillion error is just the tip of the financial iceberg. It's also business as usual for a military that's consistently proved its both unwilling and fundamentally unable to maintain even the appearance of fiscal responsibility.

To understand this accounting mistake, it's important to understand what it's not. This trillion-dollar screw-up probably isn't missing money, misappropriated funds or stolen taxpayer dollars. This is an accounting error caused by a combination of bad financial practices and computer errors. It is not a smoking gun proving the US military is embezzling funds from the American public.

Let's break down this complicated mess. The trillions in accounting errors are all journal vouchers. A journal voucher is a common accounting tool that helps financial institutions keep track of discrepancies in record-keeping. This is an oversimplification, but when money moves from one column to another, the journal voucher is a note that tells you why the cash moved.

Typically, journal vouchers come with a wealth of information including a detailed description of why the cash moved or was spent, including receipts and notes. But the Army didn't have any of that for most of its journal vouchers and there's a good reason -- a computer accounting program automatically created most of the journal vouchers to help it make sense of the military's messy books.

One of the biggest reasons Pentagon books are so hard to audit is that they're a mess of legacy systems that don't communicate with each other. The various branches of the American military kept their books in their own way for decades, often with no system for reconciling them. The Navy's record-keeping systems aren't compatible with the Marines, for example.

Worse, the various accounting methods of different departments within each branch often aren't compatible. That's part of what felled the Army here. Way back in 1991, the Pentagon's inspector general called out the Army for its bad accounting practices and the Army promised it could do better, because it was developing new accounting software to help bring all the old legacy systems together, get all its different departments on the same page and clean up its fiscal mess.

So the Army rolled out the General Fund Enterprise Business System, a web-based accounting platform designed to integrate or absorb all those messy legacy systems and get the Army on track for the coming 2017 audit.

But something bad happened when the Army's financial wizards fed millions of bits of information into GFEBS -- the computer system designed to save them automatically generated trillions of dollars in journal vouchers to account for a budget, assets and spending it couldn't reconcile.

That's right, the Army's new accounting software created most of the $6.5 trillion in journal vouchers. You can't blame it, though. It was only following its programming.

The problems started as Army financial auditors prepared to put the info from its old legacy systems into the new GFEBS. According to the I.G. report, Army financial experts filtered 1.3 million documents into the computer systems to help reconcile its books. During that process, for some reason, one of the computer systems removed 16,513 of the files.

"[Army accountants] did not document or support why the [legacy computer system] removed at least 16,513 of 1.3 million feeder file records," the report stated. Those missing files are probably a large part of why the GFEBS auto generated thousands of vouchers to account for trillions of dollars in unaccounted-for cash.

It gets worse. When a computer system auto-generates journal vouchers, Army accountants are supposed to go through the ledgers and manually account for the discrepancy. Which makes sense. But they didn't. The Army General Fund had 142,355 journal vouchers. The computer software created 137,618 of those and the Army accountants claimed they could explain only 3,468 of them.

But the I.G. dug into those supported journal vouchers and discovered something unpleasant -- despite Army claims to the contrary, accountants couldn't explain most of the journal vouchers they claimed they could explain. The I.G. pulled out 194 journal vouchers at random that the Army insisted it could explain -- and found that 170 lacked any documentation whatsoever.

Digging into the I.G. report provides some more answers. If this account cooking is malfeasance meant to hide shady transactions, it makes the architect look like a moron. Most of the financial inconsistencies come down to bad software and poor accounting procedures.

"For example, [Army accountants] processed a correcting [journal voucher] adjustment totaling $74.1 billion because [the Army comptroller] configured GFEBS to record transactions to the wrong general ledger accounts without providing the detailed transaction level documentation," the I.G. report stated. Bad computer-programming is not necessarily fiduciary malpractice, but it certainly opens the door for it.

In another error, the Army accounts created $8.3 million in vouchers because the old computer system incorrectly recorded annual funding as quarterly funding. Another computer error created a $9.5-billion voucher because it mislabeled an Army asset.

That these problems appear to be innocent accounting errors based on bad data and old computer systems doesn't excuse the Army or the rest of the military. This $6.4 accounting screw-up is symptomatic of a broken system. The military has been financially sloppy for so long that a full accounting of its books could take decades.

The truth is that the Pentagon has no idea where its money goes -- and every effort to clean up its financial problems exposes just how hopeless the situation is. "This report shows how despite years of talk about auditability the Pentagon's books are still largely a mess," Mandy Smithberger, director of the Straus Military Reform Project at the Project On Government Oversight told War Is Boring. "Financial management and accounting isn't a priority," she continued.

Smithberger is right. This is the same institution that can't tell investigators what real estate it owns, routinely sneaks extra weapons into the budget and shovels cash into the never-ending money pit that is Afghanistan.

This $6.5 trillion is only the start. Remember, that's just the Army's General Fund and it's only for one year. The coming audit in fall 2017 will, in all likelihood, reveal even greater fiduciary horrors.

The Pentagon's $800-Billion Real Estate ProblemThe US military has no idea what it ownsWar Is Boring

The US Department of Defense owns more than half a million properties worth in excess of $800 billion dollars. The military's real estate holdings span the globe and, all together, sprawl across 30 million acres.

Pentagon auditors can't explain what half the properties are for -- and doesn't have a plan for finding out. All this according to a Sept. 8 report from the Government Accountability Office. The nearly trillion-dollar real estate glut is merely another example of egregious military waste.

Way back in 1997, the GAO identified the Pentagon's real estate record-keeping as a "high risk" problem. The Defense Department could sell unused facilities and save billions. It just needed to figure out exactly what buildings it owned and how it used them all. But military bureaucrats made only passing attempts to find out. The Defense Department is probably still sitting on billions of dollars worth of properties it has no use for, despite 17 years of GAO goading.

"We found in September 2011 that DoD was limited in its ability to reduce excess inventory because DoD did not maintain accurate and complete data regarding the utilization of its facilities," the GAO states in its new report.

The Pentagon won't sell off facilities because it has no idea what's going on in many of them. Nobody's keeping good, centralized records. Individual property managers aren't performing mandatory audits -- and the Pentagon isn't holding them accountable.

The Office of the Secretary of Defense is in charge of the Pentagon's real estate. It uses software called the Real Property Assets Database to keep track of land and buildings. In theory. In practice, the GAO found that the software "showed facility utilization data for less than half of DoD's total inventory, and these data often were incomplete or did not reflect the true usage rate of the facilities."

The GAO sent investigators to 11 random facilities -- representing all four branches of the military -- in order to compare actual facilities to the Pentagon's database. The inspections didn't go well.

For starters, the Army has developed its own software to checks for errors in the Pentagon's real estate database -- basically, the Army program takes the land and buildings the ground combat branch knows it has and compares them to what the Defense Department says the Army has.

During the GAO's visit with the Army, officials from the ground combat branch showed off the program. The investigators told the officials which buildings they planned to inspect. The Army representatives booted up their software and plugged in one of the addresses.

The program found 45,000 inconsistencies. That is to say, compared to the actual property in question, the military's main listing for this one address was off by tens of thousands of small details. Now multiply that by half a million addresses and it becomes clear how befuddled the Pentagon is.

The Army also provided the GAO access to the Army's own internal real estate database. Investigators noted that the Army's database claimed that service officials reviewed facilities in the years 0012, 1776, 2201 and 3013. The Army promised to fix the error.

Visits to Navy and the Air Force facilities revealed similar problems. Investigators found abandoned buildings that the two branches reported as still being in use. The GAO inspectors discovered that the Navy and Air Force had demolished buildings without ever reporting them to the Pentagon. The investigators found entire building complexes that the branches reported as single structures.

The whole military real estate system is a mess. Defense Department directives mandate that on-site facility managers audit their own buildings every five years. Investigators found that, in truth, this was only happening around 20 percent of the time.

The military has taken a few steps to improve the situation, but it's all too little, too late. All of the Pentagon's efforts have modestly boosted the overall occupancy rate for its half a million structures from 46 percent four years ago to 53 percent today. That means the military still has twice as much real estate as it actually uses.

The GAO report includes comments from the Pentagon. The military concurs with the report and promises to do better.

Don't count on it. The GAO "found that DoD's plans to eliminate excess facilities in the future were unclear," and that the Pentagon "had not defined the strategies and measures it intended to employ to eliminate excess facilities on its installations."

So there's no plan. Billions of dollars in unused or underused property just sit around costing taxpayers money. Worse, the people who are supposed to be monitoring the sites just aren't doing their jobs.

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